The question of capital formation is problematic for
co-operatives in several ways: Capital surplus is paid back to the members, farm
producers are permitted to join a co-operative by paying a nominal fee for one
share, there are no markets for cooperative shares, and the member who withdraws
from membership is refunded only the purchase value of his/her share. In
recently liberalised markets in many developing countries, co-operatives are now
faced with a new competitive environment, where the ability to mobilise
investment capital to finance business growth is a key to long-term
success.

In this new competitive environment, monopolies are removed,
subsidised financing is no longer available, advisory services are discontinued
and co-operatives have to survive in competition in the market place with other
types of organisations such as investor owned firms.